The Gifts That Give Back

Over the next few decades, it is estimated that trillions of dollars will be transferred from the parents of baby boomers to their children. Charitable giving will play an enormous role in this transfer of wealth. Charitable giving provides many personal and tax benefits. The top five tips of charitable giving include (1) making sure your charity is a qualified charity (2) taking advantage of your deductions (3) maintaining appropriate records (4) creating a legacy and (5) educating your children.

First, you want to make sure your charity is qualified by the IRS as a charity. The charity should provide you with the documentation if the status as a charity is unclear to you.

Secondly, when you contribute to a qualified charity, you are entitled to an income tax deduction based upon your income and the amount of the contribution. You can also set up charitable trusts that allow you to give stock, real estate or other property to a charity while you continue to benefit from the asset during your lifetime. These trusts are referred to as split interest trusts because the charity and you benefit.

In addition, you must make sure to maintain adequate records. Regardless of the amount of any contribution, you must substantiate that it was made. This can be done by retaining the canceled check, bank record, or any written communication from the charitable organization that shows their name, the date, and the amount of contribution.

Also, your charitable giving could serve as your legacy. If you have a lifetime passion or interest in something, then you could give to a charity that might represent that passion or interest. For example, some people may have been photographers, artists or collectors. You could give your collection to a charitable organization in order to create or preserve your legacy.

Finally, you may choose to set up your own charitable organization. An individual or a family could set up a private foundation to give money to other charities. A private foundation can serve to transfer assets to the next generation. This is accomplished by involving the younger generation in the foundation’s administration, management, and grant making. Children can learn about and engage in philanthropy at an early age.



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